ECON 2010 Lecture Notes - Lecture 13: Economic Surplus, Market Price
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ECON 2010 Full Course Notes
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The monetary difference between what the consumer is willing and able to pay and the price the consumer actually pays is called consumer surplus. What a consumer actually pays for a good is less than what she is willing to pay except for the last unit purchased (that is why it was last ) Consumer surplus is shown graphically as the area under the demand curve (willingness to pay for the units consumed) and above the market price (what must be paid for those units) Another way to think about consumer surplus is that it is the maximum amount a consumer would pay to be able to buy the equilibrium amount rather than go without (consume zero) Producer surplus is the difference between what a producer is paid for a good and the cost of producing one unit of that good. The marginal cost is the cost of producing one more unit of a good.
